DECEMBER 2014

Question 2a.It is unwise for Salim not to invest in advertisements and

promotionalc a m p a i g n b e c a u s e h i s r i v a l s a r e a g g r e s s i v e l y d o i n g t h e o p p o s i t e .
Salims competitors are going all out to take his market share whileSalim doing nothing
to defend it. Losing the market means decrease inturnover and pro t. he conse!uences will
be fatal to the business int h e l o n g r u n . " v e n t h o u g h S a l i m i s c o n v i n c e d t h a t h i s
carpets
area l r e a d y d i # e r e n t i a t e d a n d o f h i g h ! u a l i t y . hese competiti
v e advantage will not last for long because it can be easily imitated by itscompetitor. b. hree
bene ts of back ward integration strategy are$Salim will have more control over the
value chain. %y integrating thepreceding production process to the e&isting business'
Salim will getmore control over the source of the original raw materials. his willensure
only good !uality raw materials are used to manufacture thehandwoven carpet in order to maintain
its high !uality.Increase the business competitive advantages by blocking competitorsfrom gaining
access to scarce resources. %y integrating the
precedingp r o d u c t i o n p r o c e s s t o t h e e & i s t i n g b u s i n e s s ' S a l i m h a s d e n i e d h i s c o
m p e t i t o r a c c e s s t o t h e r a w m a t e r i a l s n e e d e d f o r c a
r p e t manufacturingS i m p l i e d p r o c u r e m e n t a n d a d m i n i s t r a t i v e p r o c e d u r e s . S i n c
e t h e sourcing of raw materials are done in(house' the business will save ontransaction cost and the
delay in the delivery of raw materials can beminimised. )t the same time' this will also
enhance the e*cienc y of the manufacturing
processc . h e c o r e c o m p e t e n c e m u s t e n h a n c e c o m p e t i t i v e a d v a n
t a g e b y creating superior customer value. "very value(chain activity has thepotential
to provide a viable basis for building on a core competence.+ustomers are willing to pay
more for di#erentiated products.,i#erent businesses in the corporation must be similar in at least
oneimportant way related to the core competence. It is not essential thatthe products or services
themselves be similar. -ather' at least
onee l e m e n t i n t h e v a l u e c h a i n m u s t r e ! u i r e s i m i l a r s k i l l s i n c r e a t i n g c
ompetitive advantage if the corporation is to capitali e on its
corecompetence. he core competencies must be di*cult for competitors to imitate or nd substitutes
for. +ompetitive advantages will not be sustainable if
the competitor can easily imitate or substitute them. Similarly' if theskills associated with a
rms core competencies are easily imitated orreplicated' they are not a sound basis for sustainable
advantages.